Friday, November 27, 2009

Czech Efforts to Reduce Dependence on Russian Energy Faltering

Martin Roman, CEO of state-owned utility CEZ announced on November 3 that three companies submitted bids to construct the third and fourth reactor blocs for the Temelin nuclear power station along with options to construct a fifth reactor bloc at the Dukovany nuclear power station in a deal that will cost at least USD28 bn.

The three were Russia’s Atomstroyexport, Westinghouse of the US and French company Areva. Roman said he expects a winner to be selected in 2011 and said the third and fourth blocs at Temelin would be scheduled to go online in 2019/20.

What Roman didn’t tell the media is that the Russian government is placing, what some Czech diplomatic sources have described as an unprecedented amount of pressure on Czech officials to select the state-owned Atomstroyexport in what will undoubtedly be the largest nuclear power deal in history.

Vaclav Bartuska, the Czech envoy for energy security issues publicly warned the Czech political elite about the consequences of selecting Russia as the prime contractor since such a decision would tie the Czech Republic’s energy security for at least the next 15 years to a country with an unstable political future.

Czech diplomatic sources have said off-the- record that Bartuska was recently reprimanded by a member of cabinet of Prime Minister Jan Fischer’s caretaker government for what was described as “his excessively pro-Western views on matters concerning energy security.Officials from Atomstroyexport announced on October 30 that if selected the company would farm out up to 70 percent of the work on the Temelin and Dukovany projects to local companies such as reactor builder Skoda JS.

Apart from dominating the Czech market, CEZ i also active in Slovakia, Poland, Hungary, Romania, Bulgaria, Ukraine, Albania, and Turkey.

The management of CEZ which is the largest utility in CEE has recently come under fire for running the company as though it were a private fiefdom that finances the country’s largest political parties – the Civic Democratic Party (ODS) and the Social Democrats (CSSD) which ineffectively govern the country and split the economic spoils as a cartel together with a select group of other private equity companies including PPF and J&T. The latter two firms have been highly active in Russia since the early 1990s and their senior management is known to have links to the former Czechoslovak StB security service and the Soviet KGB.

Over the years journalists have jokingly re-named the country the CEZ Republic.

A Czech court, however, recently ruled that CEZ is a state company and must therefore comply with disclosure practices regarding its business activities.

One of the key people who convinced the Czech government in 2004 to appoint Martin Roman CEO of CEZ was Vladimir Johanes, one of the most powerful lobbyists in the country and son of the last communist-era foreign minister Jaromir Johanes. Vladimir Johanes studies at MGIMO during the early 1990s.

It was also Roman and the CEZ management team that opted to select Russian state-owned TVEL to supply Temelin with nuclear fuel cells beginning in 2010.

The current Czech government has also launched an investigation into a company called CEEI which was selected by CEZ to construct a storage facility for spent nuclear fuel from the Temelin nuclear power station.

The Czech media in September traced CEEI to a Liechtenstein-based company called U.B.I.E. One of the company’s directors is Markus Buchel, the Russian honorary consul to Liechtenstein. Buchel, however, claims that he is not the ultimate beneficiary officer (UBO) of U.B.I.E. and further claimed that he does not know the identity of the UBO.

Since this mounting pile of evidence clearly demonstrates that the management of CEZ does not appear to be working in the best interests of the taxpayers of the Czech Republic which in 1999 joined NATO and in 2004 the EU. It begs the question: In whose interest is the management of CEZ really working for?

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